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Income Tax Appellate Tribunal, “A” BENCH,
Before: SHRI R S SYAL & SHRI PARTHA SARATHI CHAUDHURY
ORDER
PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the assessee emanates from the order of ld.Commissioner of Income Tax(Appeals)-7, Pune dated 16.10.2017 for the Assessment Year 2014-15, as per the grounds of appeal on record.
2. The solitary grievance of the assessee, in this appeal is the addition of Rs.16,89,243/- to the Income from House Property by the Assessing Officer(AO) and as sustained by the ld.CIT(A). The relevant facts in this regard are that during the year under consideration i.e. F.Y.2013-14 relevant to A.Y. 2014-15, the assessee has shown House Property Income from property at Sindh Society, Pune for Rs.5,500/- for the entire year. Property was let out to the Daughter of the assessee Ms.Gauri Kirloskar. Further, on perusal of computation of income for the A.Y. 2013-14, it was noticed by the AO that the same House Property was let out to Volkswagen India Pvt. Ltd., A.Y. 2014-15 Atul Chandrakant Kirloskar (A) for a period of Six Months and the total rent received was Rs.11 lakhs which was discontinued during the F.Y. 2013-14. Therefore, according to the AO, the Annual Let out Value[ALV] of the Property should be Rs.22,00,000/- per annum. The fact emerged that the property of the assessee at Sindh Society, Pune, was rented out for Rs.22 lakhs for 12 months during F.Y. 2012-13 relevant to A.Y.2013-14 to Volkswagen India Pvt. Ltd., though the actual rent received was Rs.11 lakhs for Six Months. The AO noticed, therefore that for F.Y.2012-13 relevant to A.Y.2013-14, the said House Property was let out for Rs.11 lakhs to Volkswagen India Pvt. Ltd., whereas the same property was let out in the F.Y. 2013-14 relevant to A.Y. 2014-15 to the Daughter of the assessee at a very paltry and meagre amount of Rs.5,500/- per annum. The AO further noted that as per market rent, the rent is increased every year @10% normally of the previous year. In this factual backdrop by comparing the said property let-out in the previous year and the trend of the market, the ALV of the property was estimated at Rs.24,20,000/- for the F.Y.2013-14 relevant to A.Y. 2014-15 and the Income from House Property was worked out making of addition of Rs.16,89,243/- to the total income.
Being aggrieved, the assessee took up the matter before the ld.CIT(A) and placed detailed written submissions. The assessee contended that the earlier ALV of Rs.22 lakhs cannot be Fair Rental Value as the tenant at that time was a Corporate Entity and Municipal Corporation has estimated rent at Rs.6,140/-. The assessee contended that provisions of section 23(1)(b) of the Act was applicable and relied on the decision of Hon’ble Bombay High Court in the case of CIT vs Tiptop Typography 368 ITR 330 (Bom). The ld.CIT(A)
A.Y. 2014-15 Atul Chandrakant Kirloskar (A) observed that the AO has computed ALV on the basis of actual rent received by the assessee for Six Months during the A.Y.2013-14 for the same property. It was further observed that though the assessee had submitted relatable value from the Municipal Authorities of Rs.6,140/-, which is lesser than the Actual Rent received for the F.Y. 2012-13 relevant to A.Y. 2013-14, it would not apply to the case of the assessee since already Assessing Officer considered that assessee received actual rent in the just preceding year at a higher amount.
Before the ld.CIT(A), the assessee could not prove that even though the relatable value from Municipal Authorities was at Rs.6,140/-, then what were those extraneous circumstances for which the assessee was receiving more than Fair Market Rent from Volkswagen India Pvt. Ltd. In absence of such demonstration, the actual rent received of Rs.11 lakhs for Six Months was correctly considered as Fair Market Rent of the property in question. The ld.CIT(A) further held that the decision of Hon’ble Bombay High Court in the case of Tiptop Typography (supra) does not support the case of assessee and is also not applicable to the facts of the present case as in that case the AO revised the ALV from Actual Rent received shown by the assessee. In that case, no instance of getting higher rent from the same property was available and the AO determined the ALV on the basis of ALV of other properties. However, in the case of the assessee, the very same property fetched an amount of Rs.22 lakhs per annum (actual rent received of Rs.11 lakhs for Six Months in A.Y. 2013-14) whereas the assessee has shown only an amount of Rs.5,500/- per annum in A.Y. 2014-15. The provisions of section 23(1)(b) of A.Y. 2014-15 Atul Chandrakant Kirloskar (A) the Act also contemplates actual rent received/receivable is more than the ALV determined under section 23(1)(b) of the Act, then the actual rent receivable is the ALV of the property. In case of the assessee, the AO has not picked –up any extraneous data to compute the ALV, but has only considered what has been shown by the assessee in form of actual rent received for Six Months during the F.Y. 2012-13 relevant to A.Y. 2013-14. In such circumstances, the amount of rent receivable computed by the AO of Rs.24,20,000/- for the A.Y. 2014-15 cannot be faulted with. The Municipal Valuation does not help the assessee in view of the specific provisions of section 23(1)(b) of the Act. The ld.CIT(A) further observed that in the case of the assessee, the Fair Market Rent was at Rs.24,20,000/- which was based on the Fair Market Rent shown by the assessee himself in A.Y. 2013-14. Now, the assessee is suddenly offering only Rs.5,500/- as rent received per annum
Before us also, the ld.Authorised Representative(ld.AR) of the assessee reiterated the submissions placed before the Sub-ordinate Authorities and once again placed reliance on the decision of Hon’ble Bombay High Court in A.Y. 2014-15 Atul Chandrakant Kirloskar (A)
Tiptop Typography (supra). We have gone through the orders of the Sub- ordinate Authorities and we find that the ld.CIT(A) has given a very categorical findings as to the entire facts and circumstances and the legal provisions applicable to the case of the assessee. It is an undisputed fact that for F.Y. 2012-13 relevant to A.Y. 2013-14, the same property of the assessee fetched a rent of Rs.22 lakhs per annum with the actual rent received of Rs.11 lakhs for Six Months from Volkswagon India Pvt. Ltd. We find that same property was let out to the Daughter of the assessee in F.Y. 2013-14 relevant to the present Assessment Year under consideration for a meagre amount of Rs.5,500/- per annum as rent. The assessee was neither able to explain such disproportionate amount in rent received neither before the Sub-ordinate Authorities, nor before this Tribunal. The ld.AR of the assessee was repeatedly saying that it is for the AO to prove why there has been such discrepancy in the rent amount. The legal scenario is very clear that once such a discrepancy has been demonstrated and examined by the Department, the onus is on the assessee to establish the reasons for such disparity in rental income. The AO has not considered any outside property comparable rents nor has taken into consideration any other extraneous circumstances, but has only considered the disparity of rent in assessee’s own property, on one hand what he had received during the A.Y. 2013-14 and on the other, what he has received in A.Y. 2014-15. It is the duty of the assessee to explain this disparity with possible reasons and materials on record, otherwise, the tax levied on such income is definitely justified. Even the Hon’ble Jurisdictional High Court decision (supra) at para 47, it is observed and opined that “the satisfaction of the Assessing Officer with the bargain reveals that inflated or A.Y. 2014-15 Atul Chandrakant Kirloskar (A) deflated rate based on fraud emergency relationship and other consideration makes it unreasonable must precede the undertaking of the above exercise”. Therefore, in our considered view, the Subordinate Authorities have well examined that because of the relationship factor between the assessee and his Daughter out of natural love and affection, the value of rent was determined at such a lesser amount of Rs.5,500/- per annum, whereas the same property was rented out to a third party in just the preceding A.Y. 2013-14 for a much more higher value, therefore, it is nothing but the relationship aspect which has reduced the rent of the property and it has been well explained in the respective orders of the Subordinate Authorities. As already observed, the dis-proportionate rental income received on one hand from a third party and on the other from his own Daughter were examined by the AO in relation to the same property of the assessee and therefore the order of the AO has been upheld by the ld.CIT(A). Therefore, on totality of the facts and circumstances, we do not find any reason to interfere with the findings of the ld.CIT(A) which is upheld. The grounds of appeal of the assessee are dismissed.